Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from conflict of interest reporting requirements in subsection 117(1)(3) of the Securities Act (Ontario) for transactions involving related parties of a mutual fund -- monthly reporting with respect to purchases and sales effected by the funds through related persons or companies to the funds not required -- funds are subject to NI 81-106 which requires substantially similar disclosure.

Applicable Legislative Provisions

Securities Act (Ontario), s. 117(1)(3).

Citation: Re Middlefield Limited, 2015 ABASC 763

June 30, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF MIDDLEFIELD LIMITED (MIDDLEFIELD) AND MIDDLEFIELD CAPITAL CORPORATION (MCC) (the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Makers) has received an application from the Filers for a decision (the Exemption Sought) under the securities legislation of the Jurisdictions (the Legislation) exempting MCC and each Other Related Dealer (as defined below) from the requirements under section 191(1)(c) of the Securities Act (Alberta) and paragraph 117(1) 3. of the Securities Act (Ontario) to file, with respect to purchases and sales effected by the Funds (as defined below) through MCC or any Other Related Dealer, reports in connection with such transactions (the Reporting Requirement).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, New Brunswick, Newfoundland and Labrador and Nova Scotia; and

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

"management company" has the same meaning as ascribed in the Legislation.

"Middlefield Group" means Middlefield and its affiliates from time to time.

"Fund" means an investment fund managed by Middlefield or a member of the Middlefield Group from time to time.

"NI 81-106" means National Instrument 81-106 Investment Fund Continuous Disclosure.

"related person or company" has the same meaning as ascribed in the Legislation.

Representations

This decision is based on the following facts represented by the Filers:

1. Middlefield is a corporation subsisting under the laws of Alberta and having its head office in Calgary, Alberta. It is registered as an investment fund manager in Alberta, Ontario, Quebec and Newfoundland and Labrador.

2. Any representation herein relating to any future Fund (Future Fund) is made as of the time the Future Fund relies on the Exemption Sought.

3. The existing Funds (Existing Funds) are, and any Future Funds will be, either open-ended investment trusts or mutual fund corporations, or closed-end investment trusts or corporations, in each case governed under the laws of a jurisdiction of Canada. The Existing Funds are, and any Future Funds will be, reporting issuers in one or more jurisdictions of Canada and accordingly are or will be subject to the requirements of NI 81-106 and National Instrument 81-107 Independent Review Committee for Investment Funds.

4. MCC is a corporation established under the laws of Canada and is registered as an investment dealer (securities, options and managed accounts) in Alberta, Ontario and Nova Scotia. MCC, in its capacity as portfolio advisor to the Existing Funds and as investment advisor to any Future Funds, should it be so appointed, provides and will provide investment advice to each such Fund under an advisor contract and is and will be a management company for each such Fund.

5. As of the date hereof, none of Middlefield, MCC or the Funds are in default of securities legislation in any jurisdiction.

6. MCC is with respect to each of the Existing Funds, and may be with respect to one or more of the Future Funds, a related person or company.

7. Middlefield or another member of the Middlefield Group may from time to time on behalf of one or more of the Funds enter into investment advisor arrangements with one or more dealers and any such dealer may be a related person or company (each an Other Related Dealer) with respect to one or more of the Funds, pursuant to arrangements similar to the investment advisor arrangement between MCC and the Existing Funds.

8. Absent the Exemption Sought, purchases and sales effected by the Funds through MCC or an Other Related Dealer would give rise to the Reporting Requirement.

9. It is costly and time-consuming to comply with the Reporting Requirement.

10. NI 81-106 requires the Funds to prepare and file annual and interim management reports of fund performance that include a discussion of transactions involving related parties to the Funds. Such disclosure is similar to that required under the Reporting Requirement.

Decision

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted in respect of a Fund provided that:

(a) the annual and interim management reports of fund performance for the Fund disclose all of the following:

(i) the name of each related person or company to which fees were paid and the amount of fees paid to each related person or company;

(ii) the person or company who paid the fees, if they were not paid by the fund; and

(b) the records of portfolio transactions maintained by the Fund include, separately for every portfolio transaction effected by the Fund through either MCC or an Other Related Dealer, all of the following:

(i) the name of each related person or company to which fees were paid and the amount of fees paid to each related person or company;

(ii) the person or company who paid the fees.

"Denise Weeres"
Manager, Legal
Corporate Finance